12AB/80G(5) refusal set aside: CIT(E) must hear and decide, not rubber-stamp the AO report (ITAT Bangalore)

Order: ITA Nos. 2703 & 2704/Bang/2025 (ITAT Bangalore), Assessment Year 2025-26, pronounced 30.03.2026.

Facts

The assessee trust, constituted by registered deed dated 20.05.2022 with objects including education, vocational support, scholarships and anna dasoha, filed Form 10AB applications dated 30.09.2024 seeking registration under section 12AB and approval under section 80G(5); both were rejected by orders dated 25.03.2025.
The Commissioner (Exemption) rejected 12AB on two grounds: the financial statements showed expenditure not satisfactory for charitable activity, and objects including Vedic teaching and dharma-spreading indicated a religious nature; the 80G(5) application was rejected consequentially with additional reasons of its own.
Nobody appeared for the appellant at the hearing on 24.02.2026, and the Departmental Representative itself submitted that the matter be restored, since the Commissioner had rejected the application without any finding of his own, merely following the jurisdictional Assessing Officer's report.
That report cited small expenditure and donations in FY 2022-23 and FY 2023-24 and the religious objects, and the Commissioner's order reproduced the report in one paragraph and rejected the application in one line.

Issues

Whether a section 12AB refusal can rest on an Assessing Officer's report adopted without hearing and independent reasoning. Whether section 80G(5) recognition can be decided before 12AB registration is settled.

Holding

The Tribunal held that section 12AB does not prohibit registration of a charitable trust with religious aims as part of its objects, making the religious-nature reason invalid.
The Commissioner (Exemption) may obtain the jurisdictional Assessing Officer's report, but must put its contents to the assessee, give an opportunity of hearing, and then exercise independent judgement; here he relied solely on the report without such application of mind.
Section 12AB requires that, before refusing registration, opportunity of hearing be given by the Commissioner himself and a reasoned order passed thereafter; the impugned rejection, violating natural justice and the provision, was set aside with a direction for fresh hearing with rebuttal and a de-novo merits order.
On 80G(5), the Tribunal held recognition could not have been decided without 12AB registration and its fate follows the registration claim, restoring that appeal too with directions.
Both appeals were restored to the Commissioner (Exemption) and allowed for statistical purposes.

Why a client would care

A 12AB or 80G(5) refusal that merely reproduces the verification report, without a hearing before the Commissioner and his own reasons, is vulnerable on natural-justice grounds before reaching the merits.

Questions clients ask

Q1. Section 12AB was refused on the Assessing Officer’s report without a hearing. What did the Tribunal do?

It set the refusal aside and restored the matter for a fresh hearing with rebuttal and a de-novo order on merits.

Q2. Can a trust with religious aims among its objects be registered under section 12AB?

The Tribunal held section 12AB does not prohibit it, so that ground of refusal was invalid.

Q3. Could section 80G(5) recognition be decided before registration was settled?

No — recognition could not be decided without section 12AB registration, and that appeal was restored as well.

Disclaimer

This note summarises a Tribunal order for general information. It is not professional advice and does not predict the outcome of any other case. Tax and company-law positions depend on facts and dates; take a written opinion before you act. Harun Raaj & Associates is a Chartered Accountants firm in Visakhapatnam.

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